GIC, which is estimated to have purchased 54.5 million American depositary shares between Aug 11, 2020, and July 11, 2022, alleged that prices “were inflated artificially.” - Photo: Reuters
SINGAPORE: Singapore’s GIC has filed a lawsuit in the United States against Chinese electric vehicle maker Nio for allegedly exaggerating its profit and revenue.
The stockholder suit was filed on Aug 28 in the US District Court for Southern District of New York.
It names Nio and its two founders – chief executive officer William Li aka Bin Li and former chief financial officer Steven Feng aka Wei Feng – as defendants in court documents seen by The Straits Times.
GIC, which is estimated to have bought 54.5 million American depositary shares between Aug 11, 2020, and July 11, 2022, alleged that prices “were inflated artificially”.
A person close to the case told ST that the suit was filed by GIC for greater protection, even as a class action is taking place.
“GIC is already automatically a class member of the ongoing US class action against Nio, along with all other investors who purchased Nio’s American depositary shares (US-listed securities) during the time period in issue,” he said.
“Because of expiring litigation deadlines under US law, GIC filed a customary ‘placeholder’ complaint simply to preserve all its options – whether to stay or opt out of the class action,” he added.
The news sent the share price of Nio – once seen as a rising star in the EV industry – tumbling in Singapore and Hong Kong on Oct 16.
It closed at US$6.30, nearly 10 per cent lower in Singapore, and at HK$49.28, about 9 per cent down in Hong Kong.
On Aug 25, 2022, US shareholder Teddy Saye filed a class-action complaint against Nio and its chief executive officer and chief financial officer for misleading investors with fake revenues.
Mr Saye said Nio’s share price fell after a Grizzly Research report alleged that the Chinese firm had “inflated its net income by about 95 per cent through sales to a related party, Wuhan Weineng Battery Asset Co”.
In the ensuing weeks, more class action complaints were filed against Nio, with very similar allegations.
Grizzly, a US-based short-seller, had accused Nio of inflating its net profit and revenue through the sales to a related party, Wuhan Weineng Battery Asset Co. It said Nio has been flooding Weineng with more than 20,000 batteries to realise revenue before selling the inventory to clients.
That led Nio’s American depositary shares to plunge, resulting in substantial losses for investors, including GIC.
They are now seeking compensation for all losses relating to Nio’s wrongdoing and reasonable reimbursement of their legal costs, according to court documents.
GIC invested in Nio’s Series C round of fund-raising in March 2017, when it raised 600 million yuan, about S$109 million today.
Another major point of contention in the case is the extent of Nio’s control over Weineng – a company which investors alleged is not an independent company but rather a “shell” entity substantially controlled by Nio.
If this claim is substantiated, Nio would be required to consolidate Weineng’s financial data into its own reports, rendering the previous upfront revenue recognition invalid.
Nio denied the allegations back in 2022. It said the Grizzly’s report was “not substantiated” and “without merit”.
The controversy centres around Nio’s unique “battery swop and battery rental” model. In this “battery-as-a-service” model, users can buy a vehicle without the battery, renting the battery from Weineng instead.
Nio recognised the entire battery sales revenue upfront when selling batteries to Weineng. The effect was immediate: Nio’s fourth quarter 2020 revenue doubled year on year, from 2.85 billion yuan (S$518 million) to 6.64 billion yuan.
The outcome of the suits hinge on whether under US accounting standards, this revenue should be recognised incrementally as users pay monthly rental fees, or if it can be recognised immediately because the batteries were “sold” to Weineng.
Investors argued that if revenue had been recognised incrementally, as they believe is compliant, Nio’s performance at the time would have been significantly lower, and its stock price would not have surged to an all-time high of US$62 in early 2021.
Nio, in turn, asserts that control over the batteries was transferred upon sale to Weineng, and its “performance obligations” were fulfilled, thus justifying the upfront revenue recognition. These revenues were recorded as vehicle sales revenue and disclosed as related-party transactions in financial reports.
GIC’s lawsuit against Nio was temporarily stayed by the court in early October 2025, pending the outcome of the class-action lawsuit filed by US investors.
Nio shares are also listed in New York. - The Straits Times/ANN
